Traditional R&D Tax Credit Computation

Background

The R&D tax credit is designed to stimulate company R&D over time. R&D, as understood for tax purposes, is not limited to staff in white coats working in a laboratory. The electronics industry conducts many day to day activities that can qualify for R&D tax credits. Simple items, such as discarded scrap material created as a result of modifications of a fabrication process can be claimed for R&D tax credits. Ongoing research and experimentation during all phases of fabrication such as design, testing, compatibility, functionality, and ultimately production may be claimed as R&D tax credits. Specifically, companies that qualify for the credit can deduct or subtract from corporate income taxes an amount equal to 20 percent.

The lack of a permanent R&D tax credit significantly hinders long term investments and planning. With the current economic crisis and unstable financial market, companies would considerably benefit by taking advantage of a permanent R&D tax credit.

Why is a Permanent Research and Development Tax Credit Important?

It is vital to make R&D tax credits permanent. R&D is the lifeblood of a strong and competitive research sector of U.S. electronics manufacturing. Investment in a skilled research and development workforce and subsequent technology infrastructure will benefit business, workers and communities. International R&D tax incentives are significantly greater than the United States. For example, over the past 20 years, the domestic printed board industry has decreased from producing 42 percent of the global printed board revenue to less than 10 percent, resulting in the disappearance of high quality U.S. manufacturing jobs. Enacting a permanent extension of R&D tax credits can solidify the number of R&D manufacturing-related jobs in the United States and continue to facilitate the innovations necessary to compete in the global economy.